Ch 8 AC 204

-there is a cash deficiency -the cash excess is less than the minimum required cash balance

Borrowing money is required whenever:

sales price per unit

To calculate total sales on the sales budget, multiply budgeted sales in units by:

is needed to determine cost of good sold and to value ending inventory. DL budget, DM budget and MOH budget are needed to calculate this cost.

Unit product cost

-direct materials budget -direct labor budget -manufacturing overhead budget

Which budgets are needed to calculate unit product costs?

A 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed is called a(n) _____________________ or perpetual budget.

continuous

when creating an excel budget and performing what-if analysis, it is generally easiest to __________.

create the budget with the budgeting assumption tab

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted _______ ______________.

income statement

-budgetary slack -suboptimal budget recommendations

limitations of self-imposed budgeting include:

using budgeting assumptions when preparing the master budget, _____________.

makes it easier to answer "what-if" questions

All costs of production other than direct materials and direct labor are shown on the _____ _____ budget:

manufacturing overhead

All costs of production other than direct materials and direct labor are shown on the ___________ _______________ budget.

manufacturing overhead

The calculation of unit product cost requires information from the ___________ budget.

manufacturing overhead

A number of separate but interdependent budgets that formally layout a company's sales, production, and financial goals is contained in the ____________ budget.

master

the amount of goods to be acquired from suppliers during the period is shown on the _______ budget.

merchandise purchases

The amount of goods for resale to be purchased from suppliers during the period is shown on the ________ _______________ budget.

merchandise purchases budget

ordinarily cover a one-year period corresponding to a company's fiscal year. Many companies divide their annual budget into four quarters.

operating budgets

more accurate estimates and higher motivation are generally the result of using a(n) _____________ budget.

participative

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or _______.

participative budget

A budget that keeps managers focused at least one year ahead is a continuous or ___________ budget.

perpetual

Budgets are used for two distinct purposes:

planning and control

the first line of the direct labor budget consists of the budgeted units expected to be _________ during the period.

produced

In a manufacturing company, the _____ budget shows the number of units that must be manufactured to satisfy the sales needs and provide for the desired ending inventory.

production

In a manufacturing company, the _________ budget is prepared right after the sales budget.

production

a manager cannot complain that the budget was unrealistic and impossible to meet when a ________________ is in place.

self-imposed budget

Budgeted expenses for areas other than manufacturing are shown on the _______________ budget.

selling and administrative

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the _____ budget.

selling and administrative

Which of the following is needed to prepare a sales budget?

the budgeted number of units to be sold

can lead to lost sales or last-minute, high-cost production efforts.

insufficient inventory levels

In a manufacturing company, the ____________ budget is used to determine the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

production

In a manufacturing company, the _____________ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

production

Under the concept of ___________ ____________, managers should only be held accountable for items they can actually control.

responsibility accounting

because all other parts of the budget depend on it, if the __________ budget is inaccurate, the rest of the budget will be inaccurate.

sales

to calculate total sales on the sales budget, multiply budgeted sales in units by ________.

sales price per unit

accompanies a merchandise purchasing or manufacturing overhead budgeting budget.

schedule of expected cash disbursements

Gathering feedback to ensure that the plan is being followed and executed or modified as circumstances change is referred to as ___________________.

control

The first step in the budgeting process is preparing the ____________ budget.

sales

a company can consider making investments or repay outstanding principal and interest when ________.

the cash excess is greater than the minimum required cash balance

Developing goals and preparing various budgets to achieve those goals is part of the ______________.

planning

the receipts, disbursements, excess or deficiency, and financing section are all parts of the _____ budget.

cash

is prepared near the end of the master budget process. The beginning cash balance for the year is the same as the beginning cash balance for the 1st quarter and the ending cash balance for the year is the same as the ending cash for the 4th quarter.

cash budget

What is not found in the financing section of the cash budget?

cash deficiency

Davidson Corp.'s master budget shows expected direct labor cost of $90,000 for the month of May. During May, the company's expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hour of direct labor, the budgeted direct labor rate is $________ per hour.

$12 per hour (15,000 units x 1/2 hour or 7,500 required labor hours. $90,000/7500 = $12 per hour)

S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May.

$135,000 May is the month after April so, the company will be paying for 75% of May purchases + 25% of April purchases. May purchases ($140.000 x 75%) $105,000 + April purchases ($120,000 x 25%) $30,000 = $135,000

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000, required production is:

13,000 units (10,000 + 5,000) - 2,000 = 13,000

may still have cash deficiency issues during the year.

A company with adequate cash balances at the beginning and end of the year:

Master budget schedules _________.

Are based on estimates and assumptions Answer several key questions for a company

by dividing the years into quarters and then into months as the year progresses.

Companies divide their budget year

T or F: For most companies a single, annual cash budget is sufficient.

F

Month Required Production February 70,000 March 85,000 Each unit required two lbs. of material. Given a desired ending inventory of 20% of next month's production needs, the lbs. of material to be purchased in February is:

February production needs (70,000 x 2) 140,000 + Ending inventory (20% of March production needs: 85,000 x 2 x 20%) 34,000 - Beginning inventory (20% of February) 28,000 = 146,000 pounds.

-may generate greater management commitment to the budget -may help build manager confidence -are used in most companies

Highly achievable budget targets:

When top managers set __________________ ________________ goals may be unrealistically high, waste may occur, and too much slack may be allowed.

Profit targets

-labor shortages -low employee morale -erratic layoffs

Risks of not knowing in advance how much labor time will be needed throughout the budget period includes:

Which budgets are directly based on information from the sales budget?

Selling and administrative expense budget and Production budget

T or F: Many of the schedules in a master budget are based on a variety of management estimates and assumptions.

T

the balance sheet from last year because it is needed for the schedule of expected cash collections.

The annual master budget file includes

-measure operating results -establish goals -isolate areas needing attention

The purpose of a budget should be to:

required borrowing on a cash budget is calculated by _________.

adding the desired ending cash balance to the amount of the cash deficiency

the receipts section of the cash budget lists ________.

all cash inflows, except from financing

Budgets ______.

and the budgeting process can uncover potential bottlenecks before they occur, coordinate the activities of the entire organization by integrating the plans of its various parts, force managers to think about and plan for the future, define goals and objectives that can serve as benchmarks for evaluating subsequent performance. also communicate management's plan throughout the organization.

because it is needed for the schedule of expected cash collections, the annual master budget file includes the ______ _______ from last year.

balance sheet

To prepare a budgeted balance sheet as of Dec 31, 2017, data is needed from the:

balance sheet as of December 31, 2016

is developed using data from the balance sheet from the ____________ of the budget period and data contained in the various schedules

beginning

A detailed plan for the future that is usually expressed in formal quantitative terms is:

budget

makes it easier to answer "what-if" questions when preparing the master budget.

budget assumptions

When a manager imposes a budget that is too easy to attain ___________ occurs.

budgetary slack

does not rely on information from the production budget.

budgeted income statement

A significant noncash manufacturing overhead cost for many companies is:

depreciation

the number of working hours required to satisfy the production budget is shown on the ____ ____ budget.

direct labor

is based on the production budget

direct labor budget

In a manufacturing company, the ___________ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories.

direct materials

The section on the cash budget that summarizes all cash payments that are planned for the budget period is the cash _____________ section.

disbursements

computes the cost of unsold units

ending finished goods inventory budget

likely tie up funds and create storage problems_.

excessive inventory levels

On the cash budget, what is subtracted from the total cash available to find the cash excess or deficiency?

cash disbursements

Madison Corporation's expected beginning cash balance is $35,000. Cash collections are budgeted at $50,000 and cash disbursements are estimated to be $80,000. The minimum required cash balance is $20,000 and the company can borrow as much as needed in increments of $10,000. Calculate the expected ending cash balance for the month.

$25,000 ($35,000 + $50,000)-$80,000 = $5,000. Since they can borrow in increments of $10,000 they must borrow $20,000 to meet or exceed the minimum cash balance making the ending balance $25,000.

Edison Corp.'s variable MOH rate is $5.00 per direct labor-hour. Total budgeted fixed overhead is $25,000 per month. The $25,000 per month included $7,000 in depreciation expense. Total budgeted direct labor-hours for the month of July is 20,000. Based on the month of July only, the predetermined overhead rate is $_____________.

$6.25 Total MOH/Total budgeted direct labor-hours ($25,000 + (20,000 x $5)/20,000 = $6.25)

What is added to the variable selling and administrative expenses to get the total selling and administrative expenses?

fixed selling and administrative expenses

An integrated business plan that formally lays out the company's goals is called the _____ budget.

master

What number does the direct materials budget take directly from the production budget?

required production